CHESSNOID

It seems very counter-intuitive, but that is what banks and credit card companies are doing by reducing credit lines of their entire portfolio across the board.  They are doing this even after receiving funds from the corrupt bailouts approved by our government.  These banks and credit card companies are creating a self fulfilling prophecy and will see bigger losses in the future.

WASHINGTON (Reuters) —

Total U.S. consumer credit fell by a record $21.6 billion in July, Federal Reserve data showed on Tuesday, while June’s decline was bigger than previously thought.

July consumer credit outstanding fell at a 10.4% annual rate to $2.47 trillion, suggesting that households were shying away from credit amid rising unemployment.

Analysts polled by Reuters had forecast consumer credit dropping by $4 billion in July. June’s figures were revised to show a $15.5 billion drop, previously reported as a $10.3 billion drop.

Consumer credit has now declined for six consecutive months, the first time this has happened since the period from June 1991 to December 1991.

On the other end of the spectrum, even though the recession has been declared to be over by many economists and financial gurus, there has been no denial of the continued increases in unemployment and foreclosures. In fact, many of them don’t expect to see any improvements until 2010 or 2011.  That means more defaults and is pointed out by S&P in this article.  I hope the Obama Administration doesn’t bail them out again with tax payer money.  They deserve to go bankrupt based on their decisions and actions.

Reuters:

But S&P estimated credit card losses would pick up again as the economy continues to shed thousands of jobs every month in the worst recession since the Great Depression.

Credit card losses usually follow unemployment, which rose to a 26-year high of 9.7 percent in August.

S&P said that, considering its own estimates that unemployment would rise to between 10.4 percent and 12.7 percent, credit card losses rates could go up to between 10.5 percent and 13 percent and “remain in this range for the next 12 to 24 months.”

S&P said losses could also be boosted by company moves to increase fees and interest rates before limits on those charges come into effect in February 2010.

In aggregate, S&P’s credit card quality index tracks the performance of more than $491.1 billion of receivables held in trusts of rated U.S. credit card-backed securities.

American Express Co, Bank of America Corp, JPMorgan Chase & Co, Citigroup Inc, Capital One Financial Corp and Discover Financial Services make up around 80 percent of the credit card industry.